United States v. Gricco ( 2002 )

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
1-9-2002
USA v. Gricco
Precedential or Non-Precedential:
Docket 0-2149
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Filed January 9, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 00-2149 and 00-2179
UNITED STATES OF AMERICA
v.
ANTHONY J. GRICCO,
Appellant in 00-2149
WILLIAM T. MCCARDELL
William McCardell,
Appellant in 00-2179
ON APPEAL FROM THE
UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF PENNSYLVANIA
(Dist. Court Nos. 99-cr-00202-1 and 99-cr-00202-2)
District Court Judge: Clarence C. Newcomer
Argued March 8, 2001
Before: ALITO and MCKEE and KRAVITCH,*
Circuit Judges
(Opinion Filed: January 9, 2002)
_________________________________________________________________
* The Honorable Phyllis A. Kravitch, Senior Circuit Judge, United States
Court of Appeals for the Eleventh Circuit, sitting by designation.
F. Emmett Fitzpatrick (Argued)
926 Public Ledger Building
610 Chestnut Street
Philadelphia, PA 19106
Counsel for Appellant
William T. McCardell (No. 00-2179)
Peter Goldberger (Argued)
Pamela A. Wilk, Esq.
50 Rittenhouse Place
Ardmore, PA 19003-2276
Counsel for Appellant
Anthony J. Gricco (No. 00-2149)
Michael R. Stiles, U.S. Attorney
Walter S. Batty, Jr.
Louis D. Lappen (Argued)
Richard J. Zack (Argued)
Office of the United States Attorney
615 Chestnut Street, Ste. 1250
Philadelphia, PA 19106-4476
Counsel for Appellee
OPINION OF THE COURT
ALITO, Circuit Judge:
Appellants Anthony Gricco and Michael McCardell were
convicted of conspiracy to defraud the United States, tax
evasion, and making false tax returns. All of the charges
related to the conspirators' failure to report on their
personal income tax returns money that had been stolen
from airport parking facilities. We affirm the appellants'
convictions, but we vacate their sentences and remand for
further sentencing proceedings and resentencing.
I.
From 1990 to 1994, Anthony Gricco was the regional
manager for private companies that contracted with the
Philadelphia Parking Authority to operate the parking
2
facilities at the Philadelphia International Airport. Gricco
was responsible for the general operation of the facilities,
including the hiring of employees and the collection of
parking fees. Michael McCardell, Gricco's brother-in-law,
was Gricco's chief assistant. McCardell oversaw the day-to-
day activities of the tollbooths and picked up money from
the cashiers at the end of their shifts.
The parking facilities at the airport used automated ticket
machines as well as cashiers. Upon entering a lot, a
customer would take a ticket from a machine. The date and
time would be printed on the ticket and encoded in the
magnetic strip on the back. To leave the lot, the customer
would drive to a tollbooth and the ticket would be put into
another machine. This machine would read the date and
time of issuance, calculate the length of time that the
customer had parked in the lot, and display the parking fee
owed. The customer would then pay the cashier in the
tollbooth. At the end of a shift, each cashier would bundle
together the tickets and cash received and put them in a
brown bag labeled with the cashier's name and the number
of the tollbooth. Each cashier would also place in the bag
a tape from the ticket-reading machine that provided a
record of the tickets that the machine had processed. The
supervisors then would forward the bags to Gricco's
assistants.
In early 1990, Gricco, McCardell, and others made a plan
to steal money by substituting customers' real tickets with
replacement tickets showing false dates and times of entry.
A customer who had parked in the lot for a long period of
time would have a real ticket reflecting a high parking fee.
On leaving the lot, the customer would pay this fee to the
cashier. However, instead of inserting the real ticket into
the ticket-reading machine, a cashier participating in the
scheme would insert a replacement ticket, and the machine
would calculate the parking fee based on the false date and
time stamped on the replacement ticket. This replacement
ticket would indicate that the customer had parked for only
a short period of time, and thus the parking fee would be
much lower. The thieves would pocket the difference
between the amount paid by the customer and the amount
of the fee shown on the replacement tickets.
3
Michael Flannery, a technician for the company
responsible for maintaining the ticket machines, provided
the replacement tickets. Flannery also disabled the fare
displays on the ticket-reading machines so that customers
could not see that the parking fees that they were paying
were higher than the fees recorded by the machines.
Flannery initially supplied Gricco with replacement
tickets by removing tickets from the ticket-issuing
machines and then resetting the counters on those
machines. In the beginning, Flannery obtained 30 tickets a
day using this method, and one cashier, enlisted by Gricco,
used the replacement tickets to steal cash. Gricco
scheduled either McCardell or David Million, another
supervisor, to oversee the tollbooth plaza at which this
cashier worked. Gradually, more corrupt cashiers were
enlisted, and eventually Flannery began printing counterfeit
tickets.
Gricco, McCardell, Million, and Flannery expanded their
scheme over the next four years. At first, Gricco enlisted
cashiers who had engaged in a similar but smaller scheme
in 1988. Eventually Gricco recruited about 15 other
cashiers to participate. Flannery delivered the counterfeit
tickets that he manufactured to Gricco, McCardell, or
McCardell's wife. McCardell then distributed the
replacement tickets to the corrupt cashiers, and at the end
of their shifts, McCardell picked up the stolen money and
forwarded it to Gricco, who distributed the money among
the participants. The cashiers received a portion of the
proceeds stolen during their shifts, and the rest was divided
into four equal shares for Gricco, McCardell, Million, and
Flannery.
The leading participants in the scheme did not report
their unlawful income on their federal income tax returns.
Gricco kept his money in a safe, loaned cash to others and
received repayments in the form of checks or money orders,
gave cash to family members, and placed real estate under
his family members' names. Through a real estate broker
named Ludwig Cappozi, Gricco purchased several
properties for cash. Capozzi also engaged in real estate
transactions with McCardell's wife, who used cash to
4
purchase properties under both her own and McCardell's
name.
The cashiers involved in the scheme also failed to report
their unlawful income on their income tax returns. They did
not deposit their embezzled funds into banks for fear of
being detected by the Internal Revenue Service. Gricco
cautioned some cashiers not to put their money in banks,
and he advised Flannery and Million to invest in real estate
through Capozzi.
The scheme ended in September 1994, when the
Philadelphia District Attorney's Office executed search
warrants at the airport. In July 1996, the Commonwealth
of Pennsylvania brought state charges of theft, forgery, and
unlawful use of a computer against Gricco, McCardell,
Flannery, Million, and numerous cashiers. The cashiers
waived their right to a jury trial and were convicted in the
Philadelphia Court of Common Pleas. After a three-day jury
trial, Gricco, McCardell, and Million were acquitted, and the
judge dismissed Flannery's case.
In April 1999, a federal grand jury returned an
indictment against Gricco, McCardell, Million, and Flannery
for conspiracy to defraud the United States by obstructing
the lawful function of the Internal Revenue Service in the
collection of federal income taxes, in violation of 18 U.S.C.
S 371; tax evasion, in violation of 26 U.S.C.S 7201; and
making false federal income tax returns, in violation of 26
U.S.C. S 7206(1). Prior to trial, Million and Flannery
pleaded guilty and agreed to testify for the prosecution.
Gricco and McCardell proceeded to trial.
The jury found Gricco and McCardell guilty on all counts.
The government submitted a sentencing memorandum
asserting that the total amount stolen between 1990 and
1994 was $3.4 million and that the tax loss was $952,000
(i.e., 28% of $3.4 million). The presentence reports adopted
the conclusion that the tax loss was $952,000 and applied
the base-offense level corresponding to that amount. Gricco
and McCardell submitted written objections to these
calculations, as well as to various other statements in the
presentence report concerning their roles in the airport
theft.
5
The district court held a sentencing hearing. The court
first briefly paraphrased the parts of the presentence
reports relating to the sentencing enhancements. The court
gave Gricco and McCardell an opportunity to present
evidence for sentencing purposes, but they declined and
instead rested on their written submissions. The court then
stated that it had read each party's arguments and would
adopt the facts set out in the presentence reports.
The district court sentenced Gricco to 120 months of
imprisonment and McCardell to 108 months of
imprisonment. The court also sentenced each defendant to
three years of supervised release, a $75,000 fine, and $700
in special assessments. Gricco and McCardell appealed.
II.
The appellants contend that their convictions for
conspiracy are not supported by sufficient evidence. The
appellants were convicted for a so-called "Klein" conspiracy1
-- a conspiracy to defraud the United States by obstructing
the lawful function of the Internal Revenue Service in
assessing and collecting federal income taxes. See United
States v. Shoup, 608 F.2d 950, 956 (3d Cir. 1979).
In order for a Klein conspiracy to exist, an agreed-upon
objective must be to impede the IRS. Ingram v. United
States, 360 U.S. 672, 679-80 (1959). This need not be the
sole or even a major objective of the conspiracy. Id. In
addition, impeding the IRS need not be an objective that is
sought as an end in itself: an intent to hide unlawful
income from the IRS in order to conceal an underlying
crime is enough. See, e.g., United States v. Furkin, 119 F.3d
1276, 1280-81 (7th Cir. 1997). Moreover, in a Klein
conspiracy case, as in other conspiracy prosecutions, the
objectives of the conspiracy may sometimes be inferred
from the conduct of the participants. See, e.g. , United
States v. Applewhaite, 195 F.3d 679, 684 (3d Cir. 1999). In
the end, however, the evidence must be sufficient to prove
beyond a reasonable doubt that impeding the IRS was one
of the conspiracy's objects and not merely a foreseeable
_________________________________________________________________
1. See United States v. Klein, 247 F.2d 908 (2d Cir. 1957).
6
consequence or collateral effect. See United States v.
Goldberg, 105 F.3d 770, 774 (1st Cir. 1997) ("[M]ere
collateral effects of jointly agreed-to activity, even if
generally foreseeable, are not mechanically to be treated as
an object of the conspiracy.") United States v. Adkinson,
158 F.2d 1147, 1154 (11th Cir. 1998) (The government
must "prove that there was an agreement whose purpose
was to impede the IRS (the conspiracy), and that each
defendant knowingly participated in that
conspiracy."(emphasis omitted)). In determining whether
the evidence is sufficient, we must of course view the proof
in the light most favorable to the verdict and ask whether
any rational jury could have found that the government met
its burden. See, e.g., United States v. Frorup, 963 F.2d, 41,
42 (3d Cir. 1992). In this case, the government contends
that the evidence is sufficient to meet this standard and
relies chiefly on three categories of circumstantial proof.
First, the government relies on evidence that Gricco,
McCardell, and other participants in the scheme did not
report their illicit income. This evidence of parallel
individual conduct has some probative value for present
purposes, but it is plainly not enough by itself to show an
agreed-upon objective to impede the IRS. It would not be at
all surprising if all of these participants independently
reached the conclusion that it would be best not to report
their illicit income -- either because they feared attracting
investigative attention or because they simply wanted to
keep the money that they would have been required to pay
in taxes if the extra income had been reported. Accordingly,
the mere fact that participants in the scheme did not report
the income in question cannot reasonably be viewed as
giving rise to a strong inference that the participants agreed
upon this course of action.
Second, the government points to evidence that Gricco
and Capozzi, the real estate broker who assisted him in
purchasing property, structured various financial
transactions so as to avoid the filing of currency
transaction reports.2 In addition, the government notes that
_________________________________________________________________
2. Under 31 U.S.C. S 5313(a) and 31 C.F.R.S 103.22(b)(1), financial
institutions must file a currency transaction report when they engage in
a cash transaction in excess of $10,000.
7
on one occasion Gricco told Million never to "put any large
sums of money in the bank, to be careful with that,
especially anything over $10,000 because that would
generate a report the bank would send to the IRS." Gov't
Brief at 40. This proof has some probative significance for
present purposes because Gricco's desire to avoid the filing
of currency transaction reports could have stemmed from a
fear that such reports would interfere with his plan to
evade the payment of taxes on the illicit income. We
recognize, however, that the value of this evidence is
limited. The appellants were not convicted of conspiring to
violate the anti-structuring statutes, see 31 U.S.C. S 5322-
23, but with conspiring to obstruct the IRS in the
assessment and collection of taxes, and structuring does
not necessarily result in the evasion of taxes.
The government's best evidence against Gricco is
testimony that he told various participants not to deposit
their illicit income in a bank but instead to purchase safes
for their homes. These individuals testified that they
followed this advice because they did not want to attract
the attention of the IRS. It is likely that a person who
acquires illegal cash and places that cash in a home safe,
rather than a bank, will not report the cash as income on
his or her tax returns. Accordingly, a rational jury could
infer that Gricco knew that the participants to whom he
gave this advice would, in all likelihood, not pay tax on
their illicit income.
The difficult question is whether a rational jury could go
further and find that Gricco not only foresaw that this
would occur but actually intended for it to occur. Although
the question is close, we conclude that the evidence, viewed
as a whole, could persuade a rational jury to make such a
finding. A rational jury could conclude that, if participants
in the embezzlement scheme had reported their illicit
income, this might have sparked an investigation that
might have ultimately led to Gricco. Thus, not only did
Gricco have strong grounds to foresee that the participants
he advised would not report their illegal income, but a
rational jury could conclude that he had also a reason to
desire this result and that the result was something that he
specifically intended. Viewing all of the evidence against
8
Gricco together, we hold that it is sufficient to support his
conspiracy conviction.
We reach the same conclusion respecting McCardell.
McCardell admitted that Gricco told him to purchase a safe
and that he did so. A rational jury could infer that
McCardell agreed upon the objective of not reporting or
paying taxes on the illicit income because to do so would
have created a risk of discovery. We cannot say that the
evidence against McCardell is insufficient as a matter of
law.
III.
In addition to the conspiracy count, Gricco and
McCardell were each convicted of multiple counts of tax
evasion, in violation of 26 U.S.C. S 7201, and making false
tax returns, in violation of 26 U.S.C. S 7206(1). Gricco and
McCardell contend that their convictions for violating
S 7201 and S 7206(1) merge and that the district court
therefore erred in entering judgments of convictions and
sentences under both provisions.
Neither Gricco nor McCardell raised this argument in the
district court, and therefore our review is governed by Fed.
R. Crim. Proc. 52 (b), which provides that "[p]lain errors or
defects affecting substantial rights may be noticed although
they were not brought to the attention of the court." In
order to reverse under Rule 52(b), "[t]here must be an
``error' that is ``plain' and that ``affect[s] substantial rights.' "
United States v. Olano, 507 U.S. 725, 732 (1993).
"Moreover, Rule 52(b) leaves the discretion to correct the
forfeited error within the sound discretion of the court of
appeals, and the court should not exercise that discretion
unless the error " ``seriously affect[s] the fairness, integrity
or public reputation of judicial proceedings." ' " Id. (citations
omitted).
In this case, the parties' briefs focus primarily on the
question whether the district court committed any sort of
error at all, and both sides advance reasonable arguments
relating to that question. Whether a defendant may be
punished under two separate statutory provisions for the
same act or transaction depends on the intent of the
9
lawmakers. See Ball v. United States, 470 U.S. 856, 861
(1985). It is presumed, however, that punishment under
both provisions was not intended if the provisions proscribe
the "same offense," see, e.g., Rutledge v. United States, 517
U.S. 292, 297 (1996), and whether two provisions proscribe
the same offense is generally determined by applying the
rule set out in Blockburger v. United States, 284 U.S. 299,
304 (1932), which asks whether each offense requires proof
of an element that the other does not. If each offense
contains such an element, it is presumed, subject to
rebuttal, that multiple punishment is allowed. See
Rutledge, 517 U.S. at 297; Blockburger, 284 U.S. at 304.
In the present case, the government argues that the
offenses of tax evasion (26 U.S.C. S 7201) and making a
false return (26 U.S.C. S 7206(1)) each contain an element
that the other lacks. The offense of tax evasion requires
proof of an attempt to evade the payment of a tax that is
due, whereas the offense of making a false return does not
require proof of this element: a taxpayer who makes a
material misstatement of fact on a return may be convicted
under 26 U.S.C. S 7206(1) even if the taxpayer pays the full
amount that is due. Similarly, the offense of making a false
return requires proof of a false statement on a return,
whereas a violation of 26 U.S.C. S 7201 may be shown even
if the taxpayer did not file a return at all.
The defendants argue, however, that the Blockburger test
merely raises a presumption that Congress meant to permit
punishment under both provisions, that many other
circuits have held that the offenses of tax evasion and
making a false return merge when they are based on the
same act,3 and that the Supreme Court in Sansone v.
_________________________________________________________________
3. See United States v. Dale, 991 F.2d 819, 858-59 (D.C. Cir. 1993)
(S 7206 and S 7201 convictions merge where both were premised on the
same improper tax deductions); United States v. Sturman, 951 F.2d
1466, 1487-88 (6th Cir. 1991) (simultaneous convictions for S 7201 and
S 7206 may stand only where proof of tax evasion does not necessarily
prove the preparation and filing of a fraudulent return); United States v.
Helmsley, 941 F.2d 71, 99 (2d Cir. 1991) (S 7201 and S 7206 counts
merge where both were premised on omission of the same item of income
from the same tax returns); United States v. Hooks, 848 F.2d 785, 791
10
United States, 380 U.S. 343, 349 (1965), stated that the
offense of filing a false return, in violation of 26 U.S.C.
S 7203, may be a lesser included offense of tax evasion in
some circumstances.
We find it unnecessary in this case to decide whether the
district court committed an error in entering judgments of
conviction and imposing sentences on both offenses.
Assuming for the sake of argument that the district court
erred, we conclude that the other prongs of the test under
Rule 52(b) are not met. The sentences imposed on Gricco
and McCardell for making false returns are concurrent to
their sentences for tax evasion, and thus the former
sentences do not increase the length of their incarceration.
The only immediate practical effects of the concurrent
sentences on the S 7206(1) counts are special assessments
totaling $700 for each defendant. Recently, in United States
v. Roberts, 262 F.3d 286, 292-94 (4th Cir. 2001), the court
held that concurrent sentences and small special
assessments were insufficient to show that the defendants'
substantial rights had been affected by an alleged error and
did not provide an adequate basis for the court, in the
exercise of its discretion, to notice an error under Rule
52(b). We reach the same conclusion here. We do not
believe that Gricco and McCardell have suffered a
deprivation of "substantial rights," and in the exercise of
our discretion, we decline to entertain the argument that
the defendants did not raise below.
_________________________________________________________________
n.3 (7th Cir. 1988) (noting that S 7206 is included within S 7201); United
States v. Franks, 723 F.2d 1482, 1487 (10th Cir. 1983) (finding no
double sentencing because the S 7201 count was based on filing false tax
returns which understated income, and the S 7206 count was based on
tax returns that misrepresented information on foreign accounts); United
States v. Pulawa, 532 F.2d 1301, 1301 (9th Cir. 1976) (S 7206 and
S 7201 merge where the tax evasion was "accomplished by means, inter
alia, of perjured tax returns"); see also United States v. Humphreys, 982
F.2d 254, 262 (8th Cir. 1992) (stating that S 7207, the misdemeanor of
filing a false return is included within S 7201); United States v. Stone,
702 F.2d 1333, 1340 (11th Cir. 1983) ("The government agrees that in
this particular case the S 7206(1) offenses are lesser-included [offenses
within S 7201].").
11
IV.
McCardell challenges the sufficiency of the evidence
supporting his convictions for tax evasion, in violation of
S 7201, and making false returns, in violation of S 7206(1).
In considering this argument, we must again view the
evidence in the light most favorable to the verdict and ask
whether a reasonable jury could find beyond a reasonable
doubt that McCardell committed these offenses. See Frorup,
963 F.2d at 42.
At least ten participants in the underlying scheme
testified that McCardell was involved in the thefts. In
addition, Robert Walker, an investigator from the New
Jersey Division of Criminal Justice, testified that from 1991
to 1994, McCardell spent $161,000 in excess of
documented income. App. at 998. IRS agent Frank Bucci
took figures from Million's testimony about the proceeds
that he received each year (which should be the same as
McCardell's proceeds since they received equal portions)
and compared these figures to the sums that McCardell
had reported on his tax returns. App. at 1065-66. Agent
Bucci concluded that the discrepancy between the two sets
of numbers gave rise to an additional tax liability of
$57,761 for the years 1992, 1993, and 1994. App. at 1059.
McCardell does not dispute that he signed the tax returns,
which contain declarations that the signatures were made
under penalty of perjury. App. at 1140. Taken together, this
evidence is sufficient to establish that McCardell attempted
to evade taxes and made false returns. There is substantial
evidence from which a rational factfinder could find beyond
a reasonable doubt that the elements of both S 7201 and
S 7206(1) were proven.
V.
Both appellants claim that the district court made
erroneous evidentiary rulings relating to the prior state
prosecution. First, they argue that the federal government
was collaterally estopped from introducing evidence of the
thefts because the appellants had already been acquitted of
theft charges in state court. We reject this argument
because collateral estoppel does not apply in successive
12
prosecutions by different sovereigns. United States v. Bell,
113 F.3d 1345, 1351 n.6 (3d Cir. 1997); United States v.
Pungitore, 910 F.2d 1084, 1106 n.18 (3d Cir. 1990). It is
well settled that there is no violation of the Double
Jeopardy Clause or the Due Process Clause in successive
prosecutions for the same offense by the federal
government and a state government. See, e.g., Abbate v.
United States, 359 U.S. 187, 194 (1959); Bartkus v. Illinois,
359 U.S. 121, 137 (1959); United States v. Lanza , 260 U.S.
377, 382 (1922). Since different sovereigns are permitted to
prosecute the same defendant for the same crime,"[i]t
would be anomalous indeed if a sovereign were allowed the
greater power of reprosecuting individuals for offenses for
which they had been acquitted but were denied the lesser
power of proving the underlying facts of such offenses."
United States v. Tirrell, 120 F.3d 670, 677 (7th Cir. 1997).
Second, the appellants argue that the district court erred
in refusing to admit evidence of their state acquittals. It is
well established, however, that evidence of prior acquittals
is generally inadmissible. See, e.g., United States v. De La
Rosa, 171 F.3d 215, 219 (5th Cir. 1999); United States v.
Marrero-Ortiz, 160 F.3d 768, 775 (1st Cir. 1998); United
States v. Thomas, 114 F.3d 228, 249-50 (D.C. Cir. 1997);
Prince v. Lockhart, 971 F.2d 118, 122 (8th Cir. 1992);
United States v. Jones, 808 F.2d 561, 566 (7th Cir. 1986);
United States v. Irvin, 787 F.2d 1506, 1516-17 (11th Cir.
1986); United States v. Sutton, 732 F.2d 1483, 1492 (10th
Cir. 1984); McKinney v. Galvin, 701 F.2d 584, 586 n.5 (6th
Cir. 1983); United States v. Viserto, 596 F.2d 531, 537 (2d
Cir. 1979). "A judgment of acquittal is relevant to the legal
question of whether the prosecution is barred by the
constitutional doctrine of double jeopardy or of collateral
estoppel. But once it is determined that these pleas in bar
have been rejected, a judgment of acquittal is not usually
admissible to rebut inferences that may be drawn from the
evidence that was admitted." United States v. Viserto, 596
F.2d 531, 537 (2d Cir. 1979). "[A]lso a judgment of acquittal
is hearsay. The Federal Rules of Evidence except from the
operation of the hearsay rule only judgments of conviction,
Rule 803(22), not judgments of acquittal." Id . See also, e.g.,
2 McCormick on Evidence, S 298 (John W. Strong ed., 5th
ed. 1999). Judgments of acquittal, however, are still
13
inadmissible in large part because they may not present a
determination of innocence, but rather only a decision that
the prosecution has not met its burden of proof beyond a
reasonable doubt. Finally, even if the judgments of
acquittal were admissible, exclusion under Fed. R. Evid.
403 would be justified -- and highly recommended--
because the danger of jury confusion would greatly
outweigh the evidence's limited probative value. 4 See, e.g.,
De La Rosa, 171 F.3d at 219-20.
VI.
Gricco argues that the district court erred in admitting
evidence of his role in an earlier, separate scheme to
embezzle money from the airport. Gricco contends that the
district court should have excluded this evidence under
Federal Rule of Evidence 404(b) because the government
offered the evidence solely to show Gricco's propensity for
criminal activity.
In a pre-trial memorandum, the government revealed that
it intended to introduce evidence that in 1988 Gricco had
employed three cashiers to embezzle money from airport
parking facilities using counterfeit replacement tickets that
he provided to them. Government's Trial Memorandum,
reproduced in Gricco Br. at A18. The government argued
that this evidence was admissible under Rule 404(b)
because it "help[ed] establish Gricco's plan to steal money
from the Airport, his opportunity to do so, his relationship
with members of the scheme, and his intent and
knowledge." Id. at A20. At trial, the cashiers who had
participated in the earlier theft testified concerning Gricco's
role in that plot. The government offered this testimony to
show that, prior to the commencement of the scheme
involved in this case, Gricco already knew that he could
steal money from the parking facilities using counterfeit
_________________________________________________________________
4. It has frequently been stated that judgments of acquittal are not even
relevant on the issue of guilt because " ``they do not necessarily prove
innocence but may indicate only that the prosecution failed to meet its
burden of proof beyond a reasonable doubt as to at least one element of
the crime.' " McKinney v. Galvin, 701 F.2d 584, 586 n.5 (6th Cir. 1983)
(citation omitted).
14
tickets and that he knew that he could rely on the cashiers
who had participated in the earlier scheme. The
government stated that the probative value of this evidence
outweighed any unfair prejudicial effect because the
evidence "does not suggest that the jury should reach a
decision based on an improper basis; rather, the evidence
is integral to establish the scheme." Id. at A19.
The district court ordered that the evidence of the prior
theft could be used only to establish "the relationship
between Gricco and the cashiers he hired to steal, his
opportunity to run the scheme to steal, and his intent and
knowledge about the scheme." District Court's Pretrial
Order, reproduced in Gricco Br. at A6.2. The district court
also cautioned the jury on the limited use of the evidence
and instructed it not to draw any inferences of bad
character from it. App. at 218-19, 1402-04.
A trial court's evidentiary rulings under Rule 404(b) "may
be reversed only when they are clearly contrary to reason
and not justified by the evidence." United States v. Murray,
103 F.3d 310, 316 (3d Cir. 1997) (citation and quotation
omitted). Even under this standard, we are doubtful about
the propriety of admitting evidence of Gricco's involvement
in the prior scheme.
In order to admit evidence under Rule 404(b), "the
proponent must clearly articulate how that evidence fits
into a chain of logical inferences, no link of which may be
the inference that the defendant has the propensity to
commit the crime charged." United States v. Himelwright,
42 F.3d 777, 782 (3d Cir. 1994). Here, Gricco was on trial
for tax offenses, not theft. While the evidence of the prior
thefts may have been relevant to show an intent to commit
further thefts, it is questionable whether this evidence was
relevant to show an intent to commit the tax offenses. See
id. ("In order to admit evidence under the``intent'
component of Rule 404(b), intent must be an element of the
crime charged and the evidence offered must cast light
upon the defendant's intent to commit the crime.")
(emphasis added). Nor was evidence of the earlier scheme
particularly relevant to show Gricco's opportunity to carry
out his tax offenses or the knowledge needed to do so.
15
We find it unnecessary, however, to decide whether the
district court erred in admitting the evidence, because it is
"highly probable that the evidence . . . did not contribute to
the jury's judgment of conviction," Murray , 103 F.3d at 319(quoting previous Third Circuit precedent), and its
admission was therefore harmless. Because there was
overwhelming evidence in the form of the co-conspirators'
testimony to establish the 1990-1994 scheme to steal from
the Parking Authority, we are convinced that the jury would
have found that Gricco derived unlawful gains from this
scheme even without any evidence that Gricco had
participated in the earlier scheme. Accordingly, the
admission of the Rule 404(b) evidence is not a ground for
reversal.
VII.
McCardell argues that the district court erred in
admitting out-of-court statements under the co-conspirator
exception to the hearsay rule.5See Fed. R. Evid.
801(d)(2)(E). In making this argument, McCardell's brief
cites a passage in the trial transcript in which McCardell's
counsel objected when a cashier began to relate certain
statements made to her by Gricco. McCardell Br. at 34.
McCardell's attorney objected on the ground that there had
been no evidence of Gricco's participation in a conspiracy
and that Gricco's out-of-court statements were therefore
inadmissible hearsay. App. at 92. The district court
overruled the objection after the government assured the
court that it would establish the existence of a conspiracy.
App. at 92.
We hold that Gricco's statements were properly admitted
against McCardell under Rule 801(d)(2)(E), which governs
statements by "a coconspirator of a party during the course
and in furtherance of the conspiracy." To admit statements
under this rule, it must be shown by a preponderance of
the evidence that "(1) a conspiracy existed; (2) the declarant
_________________________________________________________________
5. Gricco's brief adopts by reference all of the applicable arguments made
by McCardell, but this argument is not applicable to Gricco. Out-of-court
statements by Gricco were admissions by a party opponent and are thus
not hearsay under Fed. R. Evid. 801(d)(2)(A).
16
and the party against whom the statement is offered were
members of the conspiracy; (3) the statement was made in
the course of the conspiracy; and (4) the statement was
made in furtherance of the conspiracy." United States v.
Ellis, 156 F.3d 493, 496 (3d Cir. 1998). In this case, as we
have held, the evidence sufficed to show that McCardell and
Gricco both were members of a conspiracy having as one of
its objectives the impeding of the IRS. In addition, the
evidence very clearly showed that they were both members
of a conspiracy to steal money from the airport. This latter
conspiracy provided an additional basis for admitting co-
conspirator statements even though this theft conspiracy
was not charged in the indictment. See id. at 497(statements are admissible pursuant to Rule 801(d)(2)(E)
even if the basis for admission is a conspiracy different
from the one charged). Thus, the district court did not err
in admitting Gricco's statements.
VIII.
The appellants raise numerous challenges to their
sentences. We vacate the sentences and remand for a new
calculation of the tax loss. On remand, the district court
should make specific findings of fact rather than merely
adopting the Presentence Reports (PSRs), as it did at the
sentencing hearing.
Federal Rule of Criminal Procedure 32(b)(6) permits a
sentencing court to accept a presentence report as its
findings of fact, but there is an exception for"any
unresolved objection" to the presentence report."For each
matter controverted, the court must make either a finding
on the allegation or a determination that no finding is
necessary because the controverted matter will not be
taken into account in, or will not affect, sentencing." Fed.
R. Crim. P. 32(c)(1). We have stated that "[a] finding on a
disputed fact or a disclaimer of reliance upon a disputed
fact must be expressly made. . . . This Rule is strictly
enforced and failure to comply with it is grounds for
vacating the sentence." United States v. Electrodyne Sys.
Corp., 147 F.3d 250, 255 (3d Cir. 1998).
Before the district court, the appellants disputed almost
17
all of the factual bases for sentencing, including the
amount of tax loss, which dictated their base offense level.
The PSRs did not detail how the tax loss was calculated,
and the district court's brief statement that it was adopting
the PSRs was inadequate to satisfy Rule 32(c)(1)'s
requirements.6 Although defense counsel stated at the
sentencing hearing that they would rely on their written
objections rather than orally present their arguments, the
district court should have made specific findings regarding
the disputed facts that were relevant to sentencing.
A.
For tax offenses, a defendant's base offense level is
determined by the tax loss. U.S.S.G. SS 2T1.1(a)(1), 2T1.9.7
If the offenses involved underreporting of gross income on
a personal tax return, the tax loss is treated as equal to
28% of the unreported income, unless a more accurate
determination of the tax loss can be made. U.S.S.G.
S 2T1.1(c)(1)(A). The base offense level is 18 for a tax loss of
more than $550,000 but less than $950,000. The base
offense level is 19 for a tax loss of more than $950,000 but
less than $1,500,000. The PSRs for Gricco and McCardell
applied a base offense level of 19, based on a tax loss of
$952,000. This amount was calculated by taking 28% of
$3.4 million, the total sum of money that the government
asserted was stolen from the airport. The PSRs adopted this
$3.4 million figure from the government's sentencing
_________________________________________________________________
6. At the sentencing hearing, the District Court stated:
I have read your arguments carefully, I have read the
government's response carefully. I have also read the probation
officer's response likewise.
I am satisfied this report is correct in all respects. I am
therefore
going to find as a fact, that this is -- that these facts are
accurate
and correct in all respects and I will therefore adopt these
reports.
App. at 1495.
7. The 1998 Sentencing Guidelines apply.
18
memorandum. As we detail below, the sentencing
memorandum was inadequate and inaccurate.8
1.
The Sentencing Guidelines provide that the base offense
level shall be determined based on relevant conduct, which
includes the defendant's own conduct and, "in the case of
a jointly undertaken criminal activity (a criminal plan,
scheme, endeavor, or enterprise undertaken by the
defendant in concert with others, whether or not charged as
a conspiracy), all reasonably foreseeable acts and omissions
of others in furtherance of the jointly undertaken criminal
activity, that occurred during the commission of the offense
of conviction, in preparation for that offense, or in the
course of attempting to avoid detection or responsibility for
that offense." U.S.S.G. S 1B1.3(a)(1)(B). In order to be
included in determining the defendant's offense level, the
loss resulting from the acts or omissions of others must be:
"(1) in furtherance of the jointly undertaken activity; (2)
within the scope of the defendant's agreement; and (3)
reasonably foreseeable in connection with the criminal
activity the defendant agreed to undertake." United States v.
Duliga, 204 F.3d 97, 100 (3d Cir. 2000).
Here, the total tax loss associated with the funds stolen
from the airport by all of the participants is properly
attributed to both Gricco and McCardell. Any participant's
failure to report unlawful proceeds was "in furtherance of
the jointly undertaken activities," within the scope of the
agreement, and "reasonably foreseeable" in connection with
the embezzlement scheme. Id. Consequently, the tax loss
arising from the total amount of money stolen from the
_________________________________________________________________
8. Just before oral arguments in this appeal, the government submitted
a letter advising us that it would agree to a remand for reconsideration
of the tax loss. The government stated that it would advocate a base
offense level of 18 because its estimated tax loss of $952,000 was only
$2000 above the threshold for a base offense level of 19. The government
stated that it continued to believe its calculations to be permissible and
persuasive. We have found several errors in the government's
calculations, and we therefore find it necessary to remand for a complete
recalculation.
19
airport by all of the participants is properly attributed to
both appellants.
2.
A sentencing court is permitted to make "a reasonable
estimate based on the available facts" where the exact
amount of tax loss may be uncertain. Application Note 1 to
U.S.S.G. S 2T1.1; see also United States v. Spencer, 178
F.3d 1365, 1368 (10th Cir. 1999); United States v. Bryant,
128 F.3d 74, 76 (2d Cir. 1997). Since the cashiers who
testified admitted that they did not report any of their illicit
gains on their tax returns, the assumption that the entire
amount stolen from the airport contributed to the tax loss
is valid. The district court was not obligated to pore
through the tax returns of all of the participants in the
airport theft to determine the exact amount of unreported
income. See Spencer, 178 F.3d at 1368 (refusing to require
a court to scrutinize all employee tax returns over the
course of an employer's fraudulent scheme in order to
generate a more precise tax loss computation).
The estimate of the tax loss, however, still must be
reasonable and based on available facts. The government's
brief on appeal offers one method for arriving at the $3.4
million that it alleges was the total amount stolen from the
airport. At trial, government expert Jeffrey Gemunder
testified that airport records revealed that $1,396,960 was
stolen between September 1993 and September 1994. App.
at 855. The government's brief reasons as follows: (1)
Flannery testified that his proceeds increased by 10-20%
each year between 1990 and 1994, and Million testified
that his proceeds increased by 20-50% each year; (2) to give
the appellants "the benefit of the doubt," the government
picked 30% as the annual growth rate of the scheme; (3)
since the scheme grew by 30% each year and $1,396,960
was stolen during the last year of the four-year scheme, the
amount stolen during the third year was 70% of
$1,396,960 or $977,872); (4) the amount stolen during the
second year was 70% of the amount stolen in the third year
and so forth; and (5) the amounts stolen per year add up
20
to roughly $3.4 million. Gov't Br. at 78-9.
There are several errors in this approach. First, the
testimony of Flannery and Million does not support the
percentage growth figures on which the government relies.
Flannery and Million estimated the amounts of money that
they derived from the scheme each year, and these figures
are not consistent with the percentage ranges given by the
government.9 Second, even if these percentages are
accepted, the government has not provided a reasonable
explanation for choosing an overall growth rate of 30%. The
government says that it gave the appellants the benefit of
the doubt, but if it had really done so, it would have chosen
the highest percentage in the ranges. Third, even accepting
the 30% figure, the government's method of calculating
income in prior years is mathematically incorrect. 10 Fourth,
the government's method was not used in the PSRs or by
the district court. In fact, this method was not even
presented to the district court. The government's brief on
appeal offers only this post-hoc justification and fails to
explain how the PSRs or the district court arrived at the
$3.4 million.11
_________________________________________________________________
9. The chart below shows the illegal income to which Flannery and
Million testified:
Flannery Million
(App. at 228-29) (App. at 389-90)
1990 $30,000 $400 / week
1991 $70,000-80,000 $500-600 / week
1992 $80,000-90,000 $750 /week
1993 $100,000 $2000 / week
Jan. - Sept. 1994 $72,000-75,000 $3000-3300 / week
1990-1994 $300,000 $345,000-400,000
10. Instead of calculating 70% of the income obtained in the later year,
the income earned in the later should have been divided by 1.3.
11. The government's brief on appeal offers one other method of
calculating the loss of $3.4 million: "When Million was asked how much
he believed he made in total, he testified that he made at least $400,000.
That means that the four top level thieves made at least $1.6 million
21
The government did file a sentencing memorandum with
the district court and, presumably, this is what the district
court and the PSRs relied upon. The memorandum arrived
at a total theft loss of $3.4 million by adding together (a)
the unlawful proceeds that the testifying cashiers admitted
to earning, (b) the amounts earned by nontestifying
cashiers, based on the assumption that each cashier
earned $600 for each week that he or she participated in
the theft, (c) the $297,000 that Million testified to receiving,
(d) the $352,000 that Flannery testified to receiving, and (e)
$352,000 attributed to each of Gricco and McCardell, based
on the inference that each received the same amount as
Flannery's cut. The memorandum resolved all ambiguities
in the defendants' favor and summed up these figures to
arrive at a total theft lost of "at least $2,559,600."12 App. at
1483-84. The sentencing memorandum then concluded
that "[g]iven the expert testimony in the case, the loss easily
reached $3.4 million for a tax loss of $952,000, establishing
a base offense level of 19." App. at 1484. The government
has not offered any explanation for the leap from
$2,559,600 to $3.4 million and has not pointed to any
expert testimony supporting such a leap. Since the
government's memorandum, the district court, and the
PSRs all fail to provide a coherent factual basis for the
calculation of a $3.4 million theft loss, the corresponding
tax loss of $952,000 is not a "reasonable estimate."13
_________________________________________________________________
[since they received cuts equal to that of Million], leaving $1.8 million
for
the other 15 thieves to reach a theft loss figure of $3.4 million.
Plainly,
there was sufficient evidence in the record for the court to find a theft
loss of $3.4 million and a resultant tax loss of $952,000." Gov't Br. at
78-79. We fail to see how this circular reasoning leads to a finding that
the theft loss was $3.4 million.
12. It does not appear that the government added up its own numbers
correctly.
13. The appellants' sentencing memorandum comes up with a total theft
loss of $1,668,500. App. at 1454. We see several errors in this figure,
including miscalculation of the amounts received by the testifying
cashiers, omission of the amounts received by the non-testifying
cashiers, and improper limitation of the tax loss to the years 1992, 1993,
and 1994. Under the relevant conduct provisions of the Sentencing
Guidelines, the tax loss arising from the entire scheme, from 1990 to
1994, should be attributed to the appellants.
22
Accordingly, we remand for a new calculation of the
amount of tax loss.
B.
McCardell appeals the four-level increase in his base
offense level under U.S.S.G. S 3B1.1 for his aggravating
role. The Guidelines provide for such a four-level increase
"[i]f the defendant was an organizer or leader of a criminal
activity that involved five or more participants or was
otherwise extensive." U.S.S.G. S 3B1.1(a). The Guidelines
provide for a three-level increase if the defendant was a
manager or supervisor, but not an organizer or leader, in
an extensive criminal activity, and a two-level increase if
the defendant had a leadership role in less extensive
criminal activity. U.S.S.G. SS 3B1.1(b) and (c). Factors to
consider include:
(1) the exercise of decision making authority; (2) the
nature of participation in the commission of the
offense; (3) the recruitment of accomplices; (4) the
claimed right to a larger share of the fruits of the
crime; (5) the degree of participation in planning or
organizing the offense; (6) the nature and scope of the
illegal activity; and (7) the degree of control and
authority exercised over others.
United States v. Hunter, 52 F.3d 489, 492 (3d Cir. 1995).
The determination of a defendant's role is based on all
conduct within the scope of the relevant conduct guideline,
U.S.S.G. S 1B1.3, and not solely on the acts in the counts
of conviction. Introductory Commentary to U.S.S.G. Ch. 3
Pt. B.
The district court did not err in applying the leadership
role enhancement to McCardell. McCardell's role in the
theft is relevant conduct under U.S.S.G. S 1B1.3, and the
scheme involved four leaders and at least 15 cashiers.
Flannery, Million, and the cashiers testified that McCardell
was one of the four leaders of the scheme. App. at 81, 192,
281, 309, 364. Million described McCardell as the"second
man in command" under Gricco, and one cashier testified
that McCardell was in charge when Gricco was not present.
App. at 93, 112, 364, 384. Although Flannery came up with
23
the ticket-swapping plan and initially approached Million
and Gricco to participate, Flannery testified that McCardell
was involved in discussions regarding the development and
expansion of the scheme. App. at 211, 225. McCardell was
also involved in the enlistment and training of cashiers and
was present when at least one cashier was recruited. App.
at 91, 382. He helped to distribute the counterfeit tickets to
the cashiers and often collected the money at the end of the
day. App. at 99, 100, 220-21. McCardell received the same
amount of unlawful proceeds as Gricco, Million, and
Flannery. App. at 225. This evidence supports the four-level
increase in McCardell's offense level.
C.
McCardell contests the two-level increase he received
because he "failed to report or to correctly identify the
source of income exceeding $10,000 in any year from
criminal activity." U.S.S.G. S 2T1.1(b)(1). McCardell argues
that the government did not prove that his unreported
income exceeded $10,000 in any of the relevant years.
Flannery and Million testified to the amounts they
received in each of the years from 1990 to 1994, and these
annual amounts greatly exceeded $10,000. See supra note
9. These amounts apply to McCardell as well, since he and
the three other leaders received equal cuts. McCardell
reported a total taxable income of $30,195 in 1992;
$22,955 in 1993; and $27,643 in 1994. App. at 111a,
118a, 126a. Subtracting these reported figures from the
amounts he gained from the theft scheme shows that he
had more than $10,000 in unreported income each year.
IRS Agent Bucci also testified that McCardell's unreported
income for the three-year period between 1992 and 1994
was $239,5000. App. at 1066. The sentencing enhancement
was proper.
D.
McCardell's and Gricco's offense levels were increased by
two levels because the district court believed that their
offenses "involved sophisticated concealment." U.S.S.G.
S 2T1.1(b)(2). Application Note 4 to U.S.S.G.S 2T1.1(b)(2)
24
describes sophisticated concealment as "especially complex
or especially intricate offense conduct in which deliberate
steps are taken to make the offense, or its extent, difficult
to detect. Conduct such as hiding assets or transactions, or
both, through the use of fictitious entities, corporate shells,
or offshore bank accounts ordinarily indicates sophisticated
concealment." The government supports the application of
this enhancement with evidence that the appellants
engaged in intricate financial transactions to hide their
unlawful income from the IRS and also used counterfeit
parking tickets as a sophisticated means of concealing their
theft of money from the airport. The appellants argue that
the use of the counterfeit tickets and the complexity of the
embezzlement scheme do not demonstrate sophisticated
concealment because the sophisticated concealment must
be in relation to the tax evasion, not the theft scheme.
In United States v. Cianci, 154 F.3d 106 (3d Cir. 1998),
the defendant pled guilty to tax evasion stemming from his
failure to report income obtained through embezzlement
and kickbacks. His plea agreement stipulated that the
offense level should be increased under the sophisticated
concealment provision. He later challenged this increase,
contending that while his embezzlement scheme was
sophisticated, his means of hiding income from the IRS was
not. This court's ultimate holding was that the defendant
could not challenge the increase because he was bound by
the stipulation in his plea agreement. Id. at 110. The court
did note that even if it were to look beyond the stipulation,
there would be adequate support for the finding that the
defendant "employed sophisticated means to conceal his tax
evasion from the IRS." Id. at 110 (emphasis added). He used
shell corporations, falsified documents, and failed to record
cash payments. The court also observed: "Admittedly, the
methods devised by Cianci impeded discovery by [his
employer] of his embezzlement, but they also facilitated
concealment of the income derived from the embezzlement
and thereby the necessity to report it to the government and
pay taxes on it." Id. (emphasis added). Such methods
included accepting benefits in the form of a car and money
orders instead of cash and falsifying the company's records
in order to impede discovery of his unlawful income.
25
It is clear that the Cianci panel viewed the complexity of
the embezzlement and kickback schemes as inadequate in
themselves to support a sophisticated-concealment
enhancement. Instead, the panel looked to the complexity
of the measures taken to conceal the tax evasion in order
to justify application of the sophisticated concealment
enhancement. Moreover, the Background Commentary to
U.S.S.G. S 2T1.1 states: "Although tax offenses always
involve some planning, unusually sophisticated efforts to
conceal the offense decrease the likelihood of detection and
therefore warrant an additional sanction for deterrence
purposes." (emphasis added). This statement supports the
interpretation that efforts to conceal must be efforts to
conceal the tax offense in order to be considered under this
Guideline.
Although the appellants interpret the Guideline properly,
the findings that the appellants engaged in sophisticated
concealment of their tax offenses are well-supported by the
evidence. Gricco loaned cash to others and asked for
repayment in the form of money orders and checks made
out to him or to a title company. App. at 129, 451, 535,
571. He purchased real estate in his name and in the
names of family members. He gave cash to family members
and received checks in return to buy more property. App.
at 403-04. Between 1991 and 1994, Gricco spent over
$1.365 million on real estate purchases. Of this amount,
$160,000 was in cash, and $121,000 was from relatives.
App. at 989. Capozzi, Gricco's real estate agent, testified
that Gricco used large amounts of cash for his purchases
and instructed Capozzi to "keep a low profile." App. at 628-
630. Capozzi converted the cash into money orders and
then deposited it into an escrow account used for
purchasing properties. In order to avoid filing currency
transaction reports with the IRS, Capozzi purchased the
money orders in small amounts and occasionally went to
several different branches of the same bank to purchase
the money orders. App. at 629-32. An investigator with the
New Jersey Division of Criminal Justice testified that Gricco
had deposited $372,000 of cash into banks between 1991
and 1994 but that not a single deposit was for more than
$10,000. App. at 974. Gricco would have had to file a
26
report with the IRS if his deposits had exceeded that
amount.
This evidence supports a finding of sophisticated
concealment through currency structuring, use of cash to
avoid reporting requirements, and the use of family
members' names to hide assets. See, e.g., United States v.
Middlemiss, 217 F.3d 112, 124 (2d Cir. 2000) (hiding assets
by placing them under family members' names, concealing
interests in a business, creating an extensive false paper
trail of corporate documents, and accepting only cash
payments for the extortion they committed established
sophisticated concealment); United States v. Guidry, 199
F.3d 1150, 1158-59 (10th Cir. 1999) (structuring
transactions to avoid Currency Transaction Reports serves
"the main purpose of shielding the transaction from the
Internal Revenue Service," and properly served as a basis
for the enhancement).
The district court also did not err in applying the
enhancement to McCardell. Real estate agent Capozzi
testified that McCardell's wife used cash to purchase
properties under both her name and McCardell's name.
App. at 658, 661, 673-76. Between 1991 and 1994,
McCardell spent $341,000 on real estate purchases. Of this
amount, $33,000 was in cash, and $80,000 came from the
accounts of family members. App. at 1001-02. McCardell
explained the cash flow from his mother-in-law by asserting
that his wife received money from her to pay her bills. App.
at 1129. However, conduct may support an inference of a
tax evasion motive even if a defendant proffers an innocent
rationale for his or her conduct. Voigt, 89 F.3d at 1090.
Between 1991 and 1994, McCardell deposited about
$169,000 of cash into banks, but none of the deposits
involved more than $10,000 at any one time. This evidence
showed that McCardell structured his currency
transactions, laundered money through real estate
purchases, and hid assets under family members' names.
The district court did not clearly err in finding that these
activities constituted more than run-of-the-mill tax evasion.
E.
Gricco and McCardell received a two-level increase in
their offense levels because each "abused a position of
27
public or private trust, or used a special skill, in a manner
that significantly facilitated the commission or concealment
of the offense." U.S.S.G. S 3B1.3. The appellants argue that
they never held a position of trust in relation to the victim
which, in this case, is the IRS. They further argue that they
did not even hold a position of trust at the airport at which
they were employed.
The appellants' first argument is directly foreclosed by
United States v. Cianci, supra. In Cianci, the defendant was
convicted of tax evasion for failing to report income that he
had received from embezzlement and kickbacks. The
defendant's position as a high-ranking official in a
corporation enabled him to embezzle money and receive
kickbacks but, the defendant argued, he did not hold a
position of trust with respect to the IRS, and the IRS was
the victim of his offense of conviction. This court rejected
the defendant's argument, reasoning that consideration of
the defendant's trust relationship to his corporation was
proper consideration of "relevant conduct" under U.S.S.G
S 1B1.3 for sentencing purposes. Cianci , 154 F.3d at 112.
Accordingly, we must reject Gricco's legal argument.
We review for clear error the findings that McCardell and
Gricco held positions of trust vis-a-vis the airport. Gricco
was the regional manager for the parking lots at the airport.
App. at 1117. He supervised the parking lots, was
responsible for staffing, and operated the petty cash fund at
the lots. App. at 1177. McCardell was employed as a
supervisor at the parking facilities. He watched the toll
plazas, collected the receipts from the cashiers, handled
customer complaints, and did "just about everything." App.
at 1114. Both Gricco and McCardell had sufficient
managerial and discretionary authority to warrant
sentencing enhancements for an abuse of a position of
trust.
F.
Gricco and McCardell each received a two-level increase
under U.S.S.G. S 3C1.1 for obstruction of justice. The
appellants' PSRs indicated that the enhancement was
applied because the appellants "testified falsely regarding
28
[a] material matter during trial." App. at 1492. The
appellants claim that they did nothing but testify in their
own defense at trial and that this cannot be the basis for
an obstruction of justice enhancement. This argument was
squarely rejected by the Supreme Court in United States v.
Dunnigan, 507 U.S. 87 (1993) (holding that the
enhancement does not violate a defendant's right to testify
and is properly applied where the defendant commits
perjury).
The appellants further argue that the district court erred
by failing to make findings as to which of their statements
were perjurious. The Supreme Court has required
sentencing courts to "review the evidence and make
independent findings necessary to establish a willful
impediment to, or obstruction of, justice" under the
definition of perjury.14 Dunnigan, 507 U.S. at 95. Our court,
has held, however, that express findings on the elements of
perjury, although preferable, are not required. See United
States v. Boggi, 74 F.3d 470, 479 (3d Cir. 1996). In Boggi,
the sentencing court stated: "I don't see how, in view of his
flat denials and the jury's conviction, that you can find
otherwise than that he testified falsely on the stand." Id. at
478. Although the sentencing court did not make express
findings as to the elements of perjury, our court reviewed
the record and found that the district court's application of
the enhancement necessarily included findings on the
elements and that the findings were supported by the
record. The reference to "flat denials," we concluded, was a
finding that Boggi willfully intended to provide false
testimony and that the untruths were material because
Boggi would not have been convicted had the jury believed
him. Accordingly, we refused to remand "merely because
the district court failed to engage in a ritualistic exercise
and state the obvious for the record." Id. at 479.
The district court here likewise failed to make specific
findings as to which statements constituted perjury. The
_________________________________________________________________
14. A witness testifying under oath or affirmation commits perjury if she
"gives false testimony concerning a material matter with the willful
intent
to provide false testimony, rather than as a result of confusion, mistake,
or faulty memory." Dunnigan, 507 U.S. at 94.
29
district court stated only that Gricco had "testified falsely
regarding material matter during trial" and that McCardell
was receiving "[t]wo levels upward adjustment for
obstruction of justice." App. at 1492, 1494. Nevertheless, as
in Boggi, we will not remand simply for the district court to
make findings of fact that are implicit in the record. It is
obvious that Gricco and McCardell -- both of whom denied
any participation in embezzling the money from the airport
and in underreporting their income -- committed perjury.
G.
The appellants argue that the district court failed to
comply with 18 U.S.C. S 3553(c)(1), which requires a
sentencing court to state in open court its reasons for
imposing a sentence at a particular point within a
Guideline range if that range spans more than 24 months.
The Guideline range determined by the District Court was
108-135 months, and the court sentenced McCardell to 108
months of imprisonment and Gricco to 120 months. Before
pronouncing sentence, the district court made some
preliminary comments:
One, is this [sic] the kind of offense that occurs much
too often in this community and almost becomes a way
of life. And, these two defendants were very important
people in organizing and carrying out this thing, to the
extent that just about the entire Parking Authority at
the airport was corrupted through it, even to the extent
of recruitments to engage in it. For that reason, it
seems to me that this is a very serious matter and one
that should be dealt with appropriately to somehow get
the message across to this community, that this kind
of action simply cannot be tolerated.
App. at 1513. Since the district court did give concrete
reasons for its choice of sentences, it satisfied the
requirements of 18 U.S.C. S 3553(c)(1).15 See United States
_________________________________________________________________
15. The explanation given by the district court sufficiently explains why
it did not sentence Gricco to a lower term of imprisonment within the
Guidelines range. The district court sentenced McCardell to the shortest
term allowed by the Guideline range. Although the District Court did not
provide an explanation for McCardell's sentence, this error is harmless,
as McCardell received the lightest sentence possible.
30
v. Rosa, 11 F.3d 315, 344 (2d Cir. 1993) ("[I]t is sufficient
for the court to advert to a given factor or factors in
selecting a point within the range.").
H.
McCardell challenges the district court's finding that he
had the ability to pay a fine. McCardell did not contest the
portions of the PSR showing that he had assets of $215,111
and no outstanding debts, although he did have a negative
net monthly cash flow of $960.41. McCardell PSRPP 58,
59, 64. At sentencing, the district court noted that
McCardell had rather substantial assets and decided that
McCardell could trim down his standard of living and pay
a fine out of his assets. App. at 1501. The district court's
finding is not clearly erroneous, and we uphold the $75,000
fine that was imposed.
I.
The appellants also challenge their sentences under
Apprendi v. New Jersey, 530 U.S. 466 (2000). However,
their sentences do not run afoul of Apprendi because the
appellants were sentenced below the statutory maximum
for each count of conviction. See United States v. Williams,
235 F.3d 858 (3d Cir. 2000).
J.
The government agrees that the District Court applied
the wrong version of 18 U.S.C. S 3013 in imposing the
special assessments. For felony offenses, the amount of
special assessment is $50 per count if committed prior to
April 24, 1996, and $100 per count if committed after that
date. 18 U.S.C. S 3013; Application Note 2 to U.S.S.G.
S 5E1.3. The tax conspiracy for which the appellants were
convicted occurred from 1990 to 1997. Gricco filed his
return for the 1992 calendar year in 1993. Thus, Gricco
should have been assessed $100 for the conspiracy
conviction, $100 for tax evasion committed in 1997 by filing
the false 1994 tax return, $100 for filing the false 1994 tax
return in 1997, $100 for tax evasion committed in 1997 by
31
filing the false 1993 tax return, $100 for filing the false
1993 tax return in 1997, $50 for tax evasion committed in
1993 by filing the false 1992 tax return, and $50 for filing
the false 1992 tax return. McCardell filed his tax returns
for the 1992, 1993, and 1994 calendar years in 1993,
1994, and 1995, respectively. Accordingly, he should have
been assessed $50 for tax evasion based on each of these
tax returns and $50 for filing each of these returns, as well
as $100 for the conspiracy. We remand for the district
court to impose the correct assessments.
IX.
In sum, we affirm the appellants' convictions, but we
vacate their sentences and remand for new sentencing
proceedings and re-sentencing.
32
McKEE, Circuit Judge, concurring in part and dissenting in
part:
I concur with the majority in all aspects of its opinion
except for my colleagues' conclusion that there was
sufficient evidence to convict McCardell of a Klein
conspiracy. In United States v. Alston, 77 F.3d 713 (3d Cir.
1995) we held:
A Klein conspiracy is comprised of three elements: (1)
the existence of an agreement, (2) an overt act by one
of the conspirators in furtherance of the agreement's
objectives, and (3) an intent on the part of the
conspirators to agree, as well as to defraud the United
States.
Id. at 720 n.17 (citation, internal quotations and brackets
omitted). Although a defendant's failure to report income
can be an overt act in furtherance of a Klein conspiracy,
the government must "still prove there was an agreement
whose purpose was to impede the IRS (the conspiracy), and
that each defendant knowingly participated in that
conspiracy." United States v. Adkinson, 158 F.3d 1147,
1154 (11th Cir. 1998) (emphasis added). Of course, where
there is no direct evidence "of an agreement by all for each
to evade his income taxes," the government can rely on
circumstantial proof. Id.However, "[t]he failure to disclose income is, without
more, generally insufficient to establish a Klein conspiracy."
Id. "To be sufficient, the evidence must establish an
agreement among the conspirators with the intent to
obstruct the government's knowledge and collection of the
revenue due." Id. "When the government relies upon
circumstantial evidence to establish a tax conspiracy, the
circumstances must be such as to warrant a jury's finding
that the alleged conspirators had some common design
with unity of purpose to impede the IRS." Id. A Klein
conspiracy is not established if the evidence implies only
separate purposes to evade taxes. Id. at 1155. Rather, the
evidence must "support an inference that each alleged tax
evader . . . knew of the others' tax evasion" and that "they
agreed to [evade taxes]." Id. "Although each defendant does
not have to know every act taken in furtherance of the
33
conspiracy, each defendant . . . must know that there is a
conspiracy and demonstrate a specific intent to join it." Id.McCardell argues that the government never produced
any evidence that he spoke to, or agreed with, anyone
about evading federal income taxes. Significantly, the
government appears to concede that point. Its recitation of
the evidence that McCardell was a Klein conspirator
amounts to the following: (1) he told Million that he was
concerned about alerting the IRS by exchanging large
quantities of old $100 bills for new ones at a bank; (2) he
did not report the stolen money on his federal tax returns;
(3) he deposited small sums of cash to avoid generating a
currency transaction report ("CTR"); (4) he purchased real
estate; (5) he used Capozzi to purchase real estate and to
launder the stolen money, Government's Br. at 58 n.14;
and (6) he purchased a safe at Gricco's direction. Id. at 42
n.8.
I agree that the evidence is sufficient to allow a rational
jury to conclude that McCardell did all of these things to
avoid paying taxes, and to avoid detection; and not just to
hide the proceeds of the theft. However, as noted, a Klein
conspiracy requires more. That crime is not established if
the evidence implies only separate purposes to evade taxes.
Adkinson, at 1155. On the contrary, the evidence must
"support an inference that each alleged tax evader . . .
knew of the others' tax evasion" and "that they agreed to do
so." Id. I do not believe that a jury could reasonably
conclude that this evidence proves that McCardell knew of
anyone else's tax evasion, much less that he agreed with
anyone else to evade the payment of income taxes.
Essentially, the government's case against McCardell is
that "the jury could infer that Gricco spoke to McCardell,
his brother-in-law and chief assistant, at least that he
spoke to his lower level thieves, and Million and Flannery,
about impeding the IRS," because his conduct paralleled
Gricco's conduct and the other Klein co-conspirators'
conduct. Government's Br. at 58 n.14. Therefore, claims
the government, there is sufficient evidence to support
McCardell's conviction as a Klein conspirator.
Although there is authority for the proposition that a
defendant's connection to a Klein conspiracy need only be
34
"slight," Adkinson, at 1152 (citation omitted), the reference
to "slight" refers to the "extent of the defendant's
connection to the conspiracy, not to the quantum of
evidence required to prove that connection." Id., at 1152
n.10 (citation omitted). Obviously, the government must
still meet its constitutional burden of proof beyond a
reasonable doubt, and "slight" proof that a defendant
committed a crime simply can not support a criminal
conviction. Id. at 1152. At best, the government's evidence
of McCardell's guilt of a Klein conspiracy was "slight." At
worst, it was pure speculation. Far from resting upon
substantial evidence, the government's case against
McCardell boils down to the bare-bones contention that
because Gricco, Flannery, Million and the cashiers were
Klein conspirators; McCardell must also have been one.
That is nothing more than an attempt to boot strap
McCardell's conduct in the theft scheme into a Klein
conspiracy by suggesting that it paralleled the conduct of
Gricco and the other Klein conspirators. However, the
majority correctly concedes that parallel conduct is not, by
itself, enough to prove a Klein conspiracy. Majority Op. at
7. Yet, that is the only "proof " of McCardell's guilt of that
offense.
Accordingly, I respectfully dissent from the majority's
decision insofar as it affirms McCardell's conviction for a
Klein conspiracy.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
35